Today I want to talk about selling online into a state where your only connection is your in-state customers and inventory that you store in the state with a third party. In the past, it was not clear under Virginia law whether this level of connection to Virginia was enough to require you to collect sales and use tax from Virginia customers. This changed in 2017 when Virginia expressly made it clear that an online sale into Virginia requires sales and use tax collection if the vendor stores inventory in Virginia with a third-party.
Recently, Virginia issued a ruling explaining the 2017 law. The ruling explained that the new rule applies both to companies selling through their web site or a third-party web site like Amazon. Also, the new law applies both to inventory stored at a third-party warehouse or a fulfillment center like Fulfillment by Amazon.
The Virginia Department of Taxation ruling explaining the new law is Ruling of Commissioner P.D. 18-3, Vir. Dept. of Tax. (1/5/18), and can be found at: https://www.tax.virginia.gov/laws-rules-decisions/tax-bulletins/17-3
Comment. The physical presence requirement for sales and use taxation of out of state vendors has been a taxation fixture since 1967. However, the U.S. Supreme Court has a case on its docket challenging the physical presence test. It is possible that the high court could rewrite this area of the law.
By John McCauley: I help people buy and sell businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles
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